Pearce promises not to raise taxes

Published: Monday, July 9th, 2018 at 9:12am

Updated: Monday, July 9th, 2018 at 10:20pm

FILE - In this Feb. 11, 2014, file photo. House Financial Services Committee member Rep. Steve Pearce, R-N.M., listens on Capitol Hill in Washington. The Republican candidate for governor of New Mexico has signed a pledge to oppose tax increases if elected even as the state struggles to shore up its credit rating and address public pension liabilities. (AP Photo/Cliff Owen, File)

SANTA FE – The Republican candidate for governor of New Mexico has signed a pledge to oppose any tax increases if elected, even as the state struggles to shore up its credit rating and address public pension liabilities.

Congressman and gubernatorial contender Steve Pearce confirmed Monday his commitment to conservative activist Grover Norquist’s famous pledge against any net tax increases if elected governor.

In a written statement, Pearce said “raising taxes would make a desperate situation even worse,” describing his approach to stemming outflows of people, business and jobs from the state.

“I am proud to pledge to the working families and small businesses of New Mexico that I will not raise taxes on them as Governor,” he said in the statement.

Pearce’s promise on taxes may be easily kept at first. New Mexico is in the midst of an oil-sector boom that is boosting state government income at current tax rates.

At the same time, the state’s credit rating was downgraded in June by Moody’s Investors Service in response to looming pension liabilities, spending obligations to Medicaid and volatile sources of state government income. Tax policy analysts warn that the tax pledge eventually could limit Pearce’s budget-balancing options and potentially lead to abrupt state spending cuts.

“Essentially what it means is you have to cut your way out of a fiscal crisis,” Meg Wiehe said, deputy director of the Institute on Taxation and Economic Policy in Washington, D.C. “The alternative vision is having strong, sustainable revenues to invest in strong public education and things that really drive a state economy.”

A little over a year ago, New Mexico policy makers were wrestling with how to fill a budget gap left by low energy prices and a sluggish economy. Gov. Susana Martinez, who cannot run for a third consecutive term in November, has staunchly opposed any tax increases.

The state tapped into cash balances at school districts, slashed agency spending and cut budgets at state colleges and universities, while court clerks cut back public hours and state museums increased some admission fees.

Richard Anklam, executive director of the New Mexico Tax Research Institute, said a promise against any tax increase may tie Pearce’s hands when petroleum prices falter.

“He can make a promise like that safely now at this moment in time because there’s a lot of revenue to play with,” Anklam said, describing his personal outlook. “I think the policy makers should always maintain flexibility to raise and reduce revenue sufficiently to meet the state’s needs.”

New Mexico last year authorized a rainy day fund that gradually sets aside oil and natural gas proceeds in booming years for use during future fiscal emergencies. The fund is in its infancy.

Pearce is running for governor against Democratic Congresswoman Michelle Lujan Grisham, who previously ran health-related state agencies under three state governors.

The two House members fell on opposite sides of the Trump administration’s federal tax overhaul, with Pearce providing support and Grisham voting against the changes.